Bank Of Baroda

Dear Stakeholder,
 
 I am delighted to report that Bank of Baroda has delivered a robust
 performance in 2008-09 at a time which is tough and challenging for the
 banking and financial services industry across the globe.
 
 Since the mid-2008, the global economy has been experiencing a severe
 slowdown inflicted by a massive banking and liquidity crisis. With all
 the advanced economies in a synchronized recession, the global GDP is
 projected to contract for the first time since the Second World War.
 
 While the impact of the global crisis was relatively less on India, the
 contraction of capital flows and sell-off in domestic market adversely
 affected the domestic and external financing channels for Indian
 corporates. A sharp slowdown in global demand adversely affected
 Indias exports and industrial performance. Reserve Bank of India had
 to shift its policy stance from monetary tightening in response to the
 spiralling inflationary pressures in the first half of 2008-09 to
 monetary easing in response to downward inflationary pressures and
 moderation of growth engendered by the crisis.
 
 Against this backdrop, notwithstanding the most volatile market and
 policy environment, the Bank moved ahead with a thrust on qualitative
 growth.  
 
 It expanded its global business level by 30% (y-o-y) to Rs 3,36,383
 crore by end-March, 2009 and at the same time brought down, in absolute
 terms, both the gross and net non-performing assets.
 
 Being a Bank with a strong overseas presence, it in its fold has more
 than 36 million global customers enjoying the state-of-the-art
 technology. Its performance in 2008-09 reflects its strength to
 consolidate its position as a premier Public Sector Bank given its
 growing geographical reach, a vast bouquet of products and services and
 robust risk management capabilities.
 
 New Initiatives
 
 The value proposition of the Bank to its customers lies in its
 impregnable foundation and inner strength as a financial service
 provider by leveraging its technology and brand.  During the year
 2008-09, the Banks focus was mainly on evolving effective strategies
 to optimize human resource management in a highly motivational work
 environment, drawing maximum mileage out of the available Information
 Technology infrastructure and imbibing a full-fledged marketing culture
 to promote a sense of professionalism in approach and attitude.
 
 The Bank put in place a progressive marketing and sales structure and
 implemented sales campaigns with specific business targets and lead
 generation programs. The Banks business philosophy revolved around the
 notion of customer centricity and market analytics to ensure higher
 order customer satisfaction. The Bank leveraged its technology to make
 available good quality products and services to its customers without
 sacrificing the personal touch in customer relations. During 2008-09,
 the Bank launched a host of business, customer and technology
 initiatives to create a strong foundation for sustainable growth in the
 years ahead.
 
 By 31st March, 2009, the Bank completed Core Banking Solution (CBS)
 rollout in 1,922 domestic branches accounting for 94% of its business.
 All CBS branches of the Bank are enabled for inter bank remittances
 through RTGS and NEFT. The CBS has also been implemented in its 43
 overseas branches and 23 branches of its overseas subsidiaries. The
 Banks ATM network too expanded to 1,179 with two biometric ATMs in the
 rural areas. The Bank launched several new IT products and services
 such as Phone Banking Service, Corporate Cash Management System,
 Payment Messaging Solution and Global Treasury, etc., to increase the
 customer convenience and also to reduce the transaction cost.
 
 In order to improve the credit flows under the Retail Business, the
 Bank took many initiatives introducing new products both on assets and
 liability sides during 2008-09 such as Loan for Earnest Money Deposit,
 Baroda Additional Assured Advance to NRIs, Baroda Bachat Mitra etc.
 Besides, various products were modified to make them more market
 oriented.
 
 In order to mobilize fresh retail business, the Bank, adopting an
 aggressive market strategy, launched Retail Loan Festival Campaigns
 offering various concessions during the campaign period. MoUs were
 signed with a number of car manufacturing companies and tie-up
 arrangements made for providing Life Insurance Cover to Education Loan
 and Home Loan customers sanctioned under special packages.
 
 In its role as a partner to the rural development, the Bank, besides
 meeting all its credit deployment targets, established four Baroda
 Swarojgar Vikas Sansthan during the year 2008-09 for imparting training
 to the unemployed youth and facilitating in their gainful
 self-employment. The Bank launched a number of Credit Campaigns for
 Direct Agriculture and SME sectors, organized credit camps at the
 branch level and provided credit facilities to the borrowing customers
 in terms of customized products and services. The Bank has identified
 350 thrust branches with potential for agriculture lending and has been
 pursuing the Business Facilitator Model for canvassing agriculture
 loans.  The Bank adopted 101 villages across the country for all- round
 integrated development and cent percent financial inclusion.
 
 Business Performance Highlights
 
 The Bank continued its journey of making sustained growth by setting
 new milestone of business size recording global business growth of 30%
 during 2008-09. The domestic deposits of the Bank increased by 23.6%
 and domestic advances rose by 29.3% - way ahead of the Indian banking
 industrys average growth. The priority sector credit surpassed the
 mandatory requirement and registered a growth rate of 23.9% during the
 year 2008-09. The Bank recorded a growth of 24.2% in SME credit, 27.9%
 in farm credit and 16.3% in retail credit reflecting a balanced growth
 of its loan book.
 
 The level of Banks Net Profit at Rs 2,227.20 crore for the year
 2008-09 reflected a robust year-on-year growth of 55.2%. During
 2008-09, the Banks overseas business grew by 46.3% partly reflecting
 an impact of 25.0% depreciation of rupee against the US dollar on rupee
 balance sheet. The overseas business contributed 22.5% to the Banks
 Global Business and 21.2% to the Banks Gross Profit during 2008- 09.
 
 As the Banks primary objective is to grow with quality, the Bank
 focused on containing the impaired assets to the minimum possible
 level. While the Gross NPA in domestic operations stood at 1.51% at
 end-March 2009, the same for Overseas Operations was just 0.51%. The
 global Net NPA too was pegged at 0.31% by the year-end 2008-09 in line
 with the promise given by the Bank to its stakeholders.
 
 Looking Forward
 
 On 20th July 2008, the Bank completed its Centenary year.  For Bank of
 Baroda, it has been a long and eventful journey over 100 years and
 across 25 countries. After undergoing a massive transformation by
 changing its logo in June 2005, the Bank won many industry level awards
 for its marketing and business initiatives and strived to optimize its
 competitive edge in the banking space. The Baroda brand positioning was
 entrenched in the consumer mind as Indias International Bank,
 balancing its time tested values over its 100 years of existence with
 the contemporary challenges of being market sensitive and responsive as
 it marches tirelessly towards its next century.
 
 In order to position the Bank as the most preferred bank, it would be
 necessary to consolidate the Banks position by reorienting its
 policies, products, procedures and pricing strategies to best suit the
 customer needs and expectations.  The coming year 2009-10 is,
 therefore, a special year from the perspective of the Banks customers.
 
 The Bank has taken a series of customer-centric technology initiatives
 in the past few years. The transaction processing system has stabilized
 under the CBS environment. The alternate e-delivery channels are made
 available to the customers. Thus, many steps have been taken by the
 Bank to serve the customers with speed and efficiency.
 
 Banks Corporate Goals & Strategy
 
 To maximize quality growth and profit through enhanced customer
 orientation with prudent risk and liquidity management policies and
 practices in our endeavour to consolidate Banks financial strength
 
 During the year 2009-10, the Bank would continue to perform with a
 thrust on Growth with Quality by focusing on low-cost deposits, by
 further reducing the dependence on bulk Business and by protecting the
 asset quality with a firm control on the process of credit origination.
 
 The Banks business plan and broad strategy in the year 2009-10 to
 achieve its corporate goals, objectives and to explore newer business
 opportunities in the domestic as well as overseas market would be as
 under:
 
 Reorienting its systems and procedures towards customer convenience and
 enhanced customer satisfaction.
 
 Formulating and adhering to the best corporate governance practices
 with an aim to set high standard of ethical values, transparency and
 disciplined approach to achieve excellence.
 
 Focusing on a consistent and broad-based resource mobilization plan.
 
 Enlarging the base of retail customers by leveraging technology and
 taking newer technology based initiatives.
 
 Diversifying the loan book and managing the credit risk effectively.
 
 Penetrating deeper into hitherto unbanked centres/ customer segments.
 
 Aggressively canvassing non-fund based business so as to improve the
 share of fee-based income.
 
 Maintaining a fine balance between the size and the strength of the
 Balance Sheet by managing Net Interest Margin (NIM), Risk Profile of
 the Bank and improving the Cost-Income Ratio.
 
 Enhancing the image of the Bank as a Customer Centric Organization.
 
 During the year 2008-09, Bank of Baroda enhanced the strength of its
 balance sheet and proved its ability to deliver strong results even
 during turbulent times. With a sustained thrust on risk management,
 technology, marketing and customer centricity, it is well positioned to
 take advantage of the future opportunities.
 
 In our journey, I solicit your continued cooperation and patronage.
 
 M. D. Mallya
 Chairman & Managing Director